Blog

Thursday, 4 September 2008

In an online environment Strategic Capability is key to the overall success of the organisation. Strategic capability can be defined as the adequacy and suitability of the resource and competences of an organisation for it to survive and prosper. Within the strategic capability it is important to look at competences threshold and core along with resources both unique and tangible.

Competences

Firstly threshold competencies are the absolute minimum that is required to meet customers minimum requires and continue to exist. These competencies could be a host, basic webpage and a stock inventory system.

Secondly core competencies these are activities that give a competitive advantage and make it hard for competitors to imitate or improve on. These competencies could be the online shops ability to cater for the customer with an offering that is hard to replicate. E.g. small businesses customer service compared to a large retailer.

Resources

Firstly threshold resources again these are activities that meet the minimum requirements E.g. the level of staff to just about satisfy customers or the technology that just about serves the customer to their expectation.

Secondly unique resources these are activities that give that competitive edge. This could be a super dooper system that allows you to benefit from added functionality that a competitor cannot easily replicate.

Cost Efficiency

Cost efficiency is also an important strategic capability. This gives resources and competences the capability of trying to be competitive. There are four sources to which cost efficiency could be affected:

Experience

Product/process Design

Supply Cost

Economies of Scale

Dynamic capabilities are key in a fast changing environment such as the internet. Dynamic capabilities are an organisation's abilities to develop and change competencies to meet the needs of a rapid changing market place. Organisational knowledge is also key to keeping up with demand, knowledge is key in the problem solving process, but also there needs to be organisational change processes to allow organisation knowledge to benefit organisation capabilities.

In trying to create a strategy it is key to create a strategic capability these can be either primary or support. Primary activities are directly related to creating the product or service and also delivering it. Support activities help to improve the effectiveness or efficiency of primary activities. As an online business it is important to think about the support activities as well as the primary activities that most web businesses remain focused on. Drawing Up a Value Chain Analysis can provide an important insight into what a business has a need to focus on:

As you can see from the diagram above there is a gap between operating cost and assets therefore giving a good insight into where the focus needs to be.

Activity Map for Change

Activity maps can provide useful for all businesses whether online or offline. The advantage is that activity maps can provide a strategy to improve as illustrated in the example below:

I know I've done one before but by this simple process you can come up with creative ideas to solve problems and add value. E.g. a retailer in a boutique shop currently has high postage costs but the retailer is able to offer a collect in store or delivery if they are based in a certain location this gives added value and can reduce the cost.

If we look at the products rather than take the risk with large scale manufacture you could have users upload their own designs and get them printed when necessary. The list of opportunities online is now endless with the range of and breadth of information that is available and at peoples finger tips. The problem is in the support activities as if primary activities are extremely fast users expect that same level of discipline in the support and after care sales of a purchase.

Benchmarking Against Competitiors

This is another way to see where you are. Yesterday I talked a bit about SWOT and PESTLE these are two forms of benchmarking practices against competitors. One way to look at this is that if you are behind your competitor then its best to have a look at what they are doing well and what they are doing not so well. If your a leader or are looking at niche I would stay clear of benchmarking and look at using SWOT for a customer analysis as shown below:

This was put together really quickly as an illustration of how to analyze a customer and immediately get an idea e.g. exclusive english only brands.

Once the opportunity is discovered building can take place. There are a number of ways to build knowledge:

Socialisation - sharing views

Externalisation - articulating knowledge

Combination - process of systemising concepts into a knowlege system.

Internalisation - learning by doing

Socialisation is key as individuals need to share views with an organisation in order to determine what the user wants. Turning that knowledge into a concept is the process of externalisation. Then moving this to a combination is processing the concept into a system. Finally learn by doing.

Taking the shop as an example get customers involved and ask them what they want. Once you know what they want try to turn that knowledge into a value through a concept, once you have established what the concept is try to turn this into a system that helps with scaling and finally go and do it and learn from it.